Headline and Core Inflation: An Empirical Analysis Based on the ECB Survey of Professional Forecasters

Abstract

Quantifying individual expectations has become a very important topic in economics, both for academic researchers and policymakers. One of the most relevant advantages of collecting probabilistic expectations is that the quantitative answers can be used to compare predictions across different agents and time, as well as to analyse their consistency. The Survey of Professional Forecasters (SPF) conducted by the European Central Bank (ECB) offers expectations about real economic growth, inflation and unemployment rates. In this case, we focus on point and probability distribution forecasts for headline and core inflation rates. Since 1999, this SPF has been conducted quarterly. This survey collects responses from financial and other institutions from around the European Union. It is usually based on approximately 75 professional forecasters with an average of 60 respondents for each round. It is subject to revisions during the survey, adapting to different circumstances. These panellists usually update their forecasts following data releases or other events (such as the financial crisis) and some of them may also update because of significant shocks.